By Uditha Jayasinghe

COLOMBO, (Reuters) – Sri Lanka raised fuel prices and transport costs on Tuesday. This was a long-delayed move to address its crippling economic crisis. However, the rises will only exacerbate the country’s spiraling inflation.

Kanchana Wijesekera, Power and Energy Minister, stated in an immediate message via Twitter (NYSE:)that petrol prices will rise by 20-24% while diesel prices will increase by 35%-38%.

“The revisions of transport and other services charges were also approved by the Cabinet,” he stated.

Wijesekera stated that individuals would be encouraged “to reduce the use of petrol and manage the crisis”, and that officials in the public sector would only work remotely if instructed by their heads.

Economists predict that food and transport prices will rise, which will eventually flow to other goods.

According to data from Monday’s government, the annual inflation rate in this island nation climbed to 33.8% in April. This is a significant increase over March’s 21.5%.

Sri Lanka faces its most severe economic crisis since Independence. A serious shortage of foreign currency has caused imports to stall and the country is now short of fuel and medicines. It also suffers from rolling power outages.

This month’s resignation as prime minister has resulted in financial troubles due to rising oil prices, the COVID-19 virus pandemic, the COVID-19 epidemic that battered the tourist-reliant economy and populist tax cuts implemented by President Gotabaya Rajapaksa.

While economists agree that fuel price and power hikes are necessary in order to close the huge gap in government revenue, they also acknowledge it will cause short-term discomfort.

Dhananath, an analyst at the Advocata Institute in Colombo, stated that petrol prices have increased by 259% and diesel by 231% since Oct last year. According to him, prices of essential items and food have increased.

The most affected will be those who are poor. A cash transfer system is needed to help the poor as well as increase efficiency.

Ranil Wickremesinghe was appointed as the Prime Minister in Mahinda Rajapaksa’s place earlier this month following violence between protesters and government officials. He said that “In short-term we will face an even harder time period.” It is possible that inflation may rise even more.